A Climate for Mergers

By: Dennis Gardiner, CPA, Partner  email

As we start into 2014, it looks like the current climate is one where we are going to start to see merger conversations ramp up. This is in both our cooperative and credit union clients. It is not restricted to just one Midwestern State; we are seeing an uptick throughout the states we serve. That said, Nebraska cooperatives seem to be having a lot of activity this year. There appears to be several reasons why these mergers are happening (or why discussions are ensuing). Amongst them are:
  • Enhanced ability to compete in global marketplace
  • Ability to better serve member’s needs
  • Improve ability to retain staff
  • Financial and operational advantages, including cost sharing
  • Opportunity to offer expanded services
  • Potential manager retirement on the horizon
  • Greater convenience
(Necessity is one reason we are happy to see not make the list.) Along with merger activity, we continue to learn of discussions about strategic alliances/joint ventures. This seems to be centered on the agronomy side of our agricultural cooperative clients. Some of the rationale for this is to better utilize equipment, facilities and personnel. The financial health of our clients has never been better. The management and boards of directors of these organizations can be proud of the organizations they’ve built. Of course we are sad to see clients disappear, but we understand the reasons behind these mergers. Change is inevitable. As you may be aware, the accounting standards now require accounting for all mergers as a purchase of one company by another. Be sure to consider visiting with us as you begin these discussions to fully contemplate the financial statement and income tax impacts.